The UK’s capital gains tax bills jumped 20 per cent from £10.8bn to a record high of £12.9bn in the past year, according to latest research.
The increase is primarily due to four major factors.
Firstly, the cut to entrepreneurs’ relief, now known as business asset disposal relief, has been lowered from £10m to £1m, costing some business owners millions in extra tax when they come to sell their shares. Many entrepreneurs consequently accelerated plans to exit their businesses when rumours of the end of ‘entrepreneurs’ relief’ started circulating in 2019 and 2020.
Secondly, buy-to-let property investors have been taking profits in the rising housing market as the average UK house price rose 16 per cent from January 2020 to December 2021.
Thirdly, a stock market rally- the FTSE 100 rose 42 per cent from its pandemic trough to its higher, pre-Ukrainian crisis, levels.
Finally, HMRC has benefitted from the enhanced cashflow resulting from new provisions on residential property.
In April 2015 a 30-day capital gains tax reporting obligation was placed on non-UK residents selling UK residential property. There was widespread ignorance of this requirement leading to large numbers of late filed returns with HMRC charging penalties for non-compliance. Additionally, from 6 April 2020 this 30-day reporting requirement applied much more widely, including to UK resident taxpayers disposing of UK residential property.
Property sales completing on or after Budget-day 2021 (27 October 2021) benefitted from an extended filing and payment deadline of 60 days.